The Bank of Japan kept rates at 1.25% and signalled its 2% inflation target was met, but warned of price risks from energy, AI and a weak yen, keeping USD/JPY near 155‑160.

The Bank of Japan left its policy rate unchanged at 1.25% and, for the first time, declared that its 2% inflation goal had been achieved. In the accompanying Outlook report, the central bank highlighted three upside price risks – higher energy costs, strong demand for artificial intelligence, and a persistently weak yen – that could push inflation higher.

Market expectations for future hikes

• Traders price a gradual rise toward a 2.00% policy rate by next summer.
• ING now expects the BoJ to raise rates in December and again in March/April.
• USD/JPY is expected to stay in a 155‑160 band before a potential decline in the second quarter of 2027.

Implications for the yen and dollar

• A weaker yen could force the BoJ to align more closely with overseas rate moves, especially the Fed and ECB.
• If the BoJ does not hike in line with foreign central banks, yen depreciation risks may intensify.
• USD/JPY slipped slightly on the hawkish hold, but the broader dollar index also fell modestly.

What traders are watching next

• The BoJ’s decision at the December meeting – hike or hold – will be key.
• U.S. CPI and Fed policy outlook for the year‑end could affect the dollar‑yen dynamics.
• Technical levels around 155 and 160 on USD/JPY remain focal points for short‑term trading.

Related news

• Yen holds firm after BoJ’s hawkish hold
• Fed officials signal need for more rate hikes
• BoJ holds rate but warns of inflation overshoot risk
• ECB's Nagel says decisive action will be taken if inflation risks persist

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This article is compiled from international market news for information only. It is not investment advice.